The Ford Way to the new economy

Posted on 27 Sep 2010 by The Manufacturer

Can Ford teach the 'real economy' evangelists something about leadership and strategy? Albert Ellis, CEO of Harvey Nash, writes.

The Ford story of recent times is compelling. Particularly if its told by Alan Mulally, the self effacing engineer who is no less than global CEO of Ford Motor Company. He was in London to give the annual CBI KPMG business leadership lecture.
Alan’s message and leadership style epitomises the current political theme around the world, as we rebalance our economies in the wake of the financial crisis. His personal style is the contra of the era when financiers and investment bankers reigned supreme. Confidence, but not arrogance. Intellect, but with humility. Communication skills, but with genuine warmth and belief.

His big point?

Manufacturing creates wealth and jobs like no other sector. Engineers innovate and create the solutions of the future. For example, two thirds of employees at Ford UK are in the engineering field (out of a total 10,0000). Worldwide, manufacturing accounts for 70% of all research and development spend. Challenges such as energy security and independence, environmental issues, creating efficiencies and reducing costs of transport are all part of the auto manufacturing strategy for the future.

On Jan 24, 1925 Henry Ford proclaimed that Ford’s vision was to “open the highways to all mankind”. A bold vision and a socially beneficial strategy was set for the company by its erstwhile founder.

When Alan Mulally joined Ford however, it was reporting losses of $17bn and running out of cash. The transformation required was challenging. A complete rethink of its brand and purpose was begun. Mulally knew Ford needed to be big in scope and scale, but provide safe and efficient transport.

Apparently 60% of the auto market is made up of the compact or small vehicle sector. And its the same in commercial jetliners according to Mulally who spent most of his career before Ford with Boeing. His transformation strategy required an emphasis on the compact vehicle market, and for every vehicle to be best in class – on CO2 emissions, safety and value for money. Ford had some natural advantages.

“One Ford” was born and the reduction of 97 different brands to less than 30 was implemented. Capacity was right sized to match real demand, production efficiencies were accelerated with the development of new models. All employees were aligned with Ford’s strategy. This also extended to the supply chain. 70% of the dollar value of a vehicle (or an airplane) rests with suppliers who had ranked Ford as the worst company to work for in industry surveys. This required a re-aligned business framework which was called “PGFA” or “profitable growth for all” and supply chain partnership structures which shared the values and vision of the OEM. A lean global enterprise enabled by efficient partner suppliers.

I sensed there was a much broader message for all industries from this simple analysis of Ford’s turnaround plan and Mulally’s visionary leadership.

On the future of auto industry itself, Alan Mulally makes some interesting points:

• there is a lot of room for improvement to the traditional combustion engine
• the move toward hybrids is tough economically, with total vehicle weight and the cost and status of current battery technology
• more electric vehicles will come onto the market but face shortfalls of investment in infrastructure to enable re-fueling and efficient running
• Ford continues to explore the hydrogen fuel solution with its attractive zero harm emissions
Mulally’s message to business: Ford have achieved a dramatic shift in competitiveness and innovation as a result of focus. On everything they do, forever improving competitiveness. That’s the foundation upon which to compete. Great products can then be layered on that secure platform. They call it “top hatting” local products for local market suitability on a global platform of scale and competitiveness. Its very much a car analogy.

My conclusion was that I had heard the valuable thoughts of a true leader for the 21st century. A passionate CEO who understands the value of the long term and can transcend above his specific industry with a message to business about leadership, which applies to us all.